Daily news

Telesat Reports Results
for the Quarter and Year

February 27, 2020

Telesat announced its
financial results for the three-month and one-year
periods ended December 31, 2019. All amounts are in
Canadian dollars and reported under International
Financial Reporting Standards (“IFRS”) unless otherwise
noted.

For the year ended December
31, 2019, Telesat reported consolidated revenue of $911
million, an increase of 1% ($8 million) compared to the
same period in 2018. When adjusted for changes in
foreign exchange rates, revenue was unchanged compared
to 2018. Revenue increases related to the Telstar 19
VANTAGE and Telstar 18 VANTAGE satellites, which were
launched in 2018, and revenues earned from short-term
services to other satellite operators. These
increases were offset by lower equipment sales, a
reduction of service for a certain customer in the
broadcast segment, lower revenue due to the completion
of the term for prepaid services in a customer agreement
which was accounted for as having a significant
financing component, and lower revenue from certain
customers in the resource sector. Operating expenses
were $165 million, a decrease of 11% ($20 million) from
2018. When adjusting for the impact of foreign exchange
rate changes, expenses decreased by 12% ($22 million).
Adjusted EBITDA1 was $763 million, an increase of 1%
($11 million) or, when adjusted for foreign exchange
rates, an increase of $3 million. The Adjusted EBITDA
margin1 for 2019 was 83.7%, compared to 83.3% in 2018.

For the year ended December
31, 2019, net income was $187 million, compared to a net
loss of $91 million for 2018. The increase in net income
for the year was principally the result of non-cash
foreign exchange gains in 2019, arising from the
translation of Telesat’s U.S. dollar denominated debt
into Canadian dollars compared to foreign exchange
losses in 2018, partially offset by higher non-cash
losses on financial instruments and a loss on
refinancing in 2019 when compared to 2018.

For the quarter ended
December 31, 2019, consolidated revenue was $220
million, a decrease of 5% ($11 million) compared to the
same period in 2018. The decrease was due to a reduction
of service for a customer in the broadcast segment,
lower revenue due to the completion of the term for
prepaid services in a customer agreement which was
accounted for as having a significant financing
component and lower equipment sales, partially offset by
an increase in short-term services provided to other
satellite operators.

Operating expenses of $51
million for the quarter were 29% ($21 million) lower
than the same period in 2018. The decrease was primarily
related to lower compensation expenses related to
non-cash share based compensation. Adjusted EBITDA1 for
the quarter was $175 million, a decrease of 8% ($15
million) compared to the same period in 2018. The
Adjusted EBITDA margin1 for the fourth quarter of 2019
was 79.6%, compared to 82.2% in the same period in 2018.
Foreign exchange rate changes did not have a meaningful
impact on revenue and Adjusted EBITDA1 during the
comparative quarter.

Telesat’s net income for the
quarter was $3 million compared to a net loss of $187
million for the quarter ended December 31, 2018. The
$190 million difference was the result of non-cash gains
on foreign exchange arising principally from the
translation of Telesat’s U.S. dollar denominated debt
into Canadian dollars in the fourth quarter of 2019 and
higher gains on financial instruments offset by a $152
million loss incurred on the refinancing of Telesat’s
debt.

“I am pleased with our
financial and operating performance in 2019,” commented
Dan Goldberg, Telesat’s President and CEO. “In addition
to achieving stable financial results relative to the
prior year, we took significant steps in laying the
foundations for our future growth. In particular
we made meaningful progress in refining the design of
our planned revolutionary Low Earth Orbit (LEO)
satellite constellation and, importantly, announced a
Memorandum of Understanding with the Canadian Government
to leverage the constellation to bridge the Digital
Divide in Canada, an arrangement we expect will generate
$1.2 billion in revenue over a 10 year period. In
addition, toward the end of last year we successfully
refinanced all of our existing debt, extending our
borrowing maturities and slightly reducing our borrowing
costs. Looking ahead, we remain heavily focused on
continuing to increase the utilization of our in-orbit
satellites, executing on our key growth initiatives,
including our planned LEO constellation, and leveraging
our spectrum rights.”